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Strategies & Market Trends : John Pitera's Market Laboratory
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To: John Pitera who wrote (7391)6/26/2006 11:43:35 AM
From: Hawkmoon  Read Replies (2) of 33421
 
The central bank appears concerned about the prospect of excessive capital spending, which "would raise the probability of an interest-rate increase in July if capex comes in above expectations in the tankan," said Yasuo Yamamoto, senior economist at Mizuho Research Institute.

This will be interesting to observe. The Japanese Government has been propping up the economy for years while their companies cleaned up their balance sheets. Richard Koo, who wrote a fine book on this balance-sheet recession in Japan stipulated that one of the things required to restore the balance is some form of economic shock therapy, where there are time and demand driven "surges" that place stress on the existing economic infrastructure and force capital expenditures.

And 8% growth from negative growth is a major surge... However, these capital expenditures must produce greater productivity in return, or they will mean nothing over the long-term.

Hawk
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